Management Buyout (mbo), Theoretical Analysis And Application Practices

MBO, Management Buy-Outs, is the process that the managers can be shareholders by purchasing the share capital. In china, we can learn through the theory and practice of MBO, that MBO can legally solve at least three problems in the existing structure:first problem is the ownership; secondly, MBO can also solve the "deputation"problem; finally, MBO solve the problem of the managers?motivation.The participators of MBO include, Consultant, the managers, seller, shareholders, and debtors.Process of MBO divides into three steps-preparation, design and transaction, location and restructure.In terms of the practice of MBO, there are several elements should be taken into account: the first is evaluating company, another is designing, the third question is financing, the last one is some associated with law.The evaluation of company should be on the base of inspecting and understanding of the business and finance. There are two objectives: one is to make the minimum price of buying; another is to provide the financial restricts for the project.There are a lot of methods for evaluating and these methods can be divided into two segments: one is the profitability and capital model; another is net present value of cash flow model.The purchase of MBO includes several contents: 1) the objection; 2) the methods; 3) the design of buyer; and so on.The managers should consider financing after evaluating the company value. Financing can take several forms: such as the individual, borrowing and issuing shares.In addition, during the process of MBO, the managers should avoid the legally risks from civil law, administrative law and criminal law.